The recent uptrend in the cryptocurrency market and Bitcoin’s rise above its 200-day moving average have once again raised the question among investors: “Is the bottom left behind?”
In his latest video analysis, Mike, an analyst at cryptocurrency analysis firm The DeFi Report (TDR), examines market structure and on-chain data metrics, warning of the need to take a cautious approach to the current bull market.
Despite Bitcoin recently rallying 10% from its lows and challenging resistance levels, TDR analyst Mike estimates there is a 65% chance the market will see an even lower low (below $58,000). He bases this prediction on on-chain “coin rotation” analysis, suggesting that the current rally may be a reaction rather than a permanent reversal.
According to data shared by the DeFi report, for past bear markets to end, investors who bought at peak prices would have to largely exit (capitulate) the market by selling at significant losses.
- Peak Buyers ($108,000-$126,000 Group): Only 51% of investors who bought Bitcoin at the top of this cycle have ever sold their assets.
- 2nd Peak Group ($92,000 – $108,000 Group): Coin rotation for this group is currently only 17%.
- At the bottom of the 2022 bear market, at least 50% of investors who bought at the peak level gave up. Current data suggests that the market needs more time to complete the process of fatigue and loss of confidence over time.
According to our analysis, there is still no strong demand from institutional investors or retailers in the market. Mike noted that spot trading volumes are at their lowest levels in the cycle, and net inflows into spot Bitcoin ETFs have been near zero (flat) for about two months. A significant increase in on-chain transaction volume and exchange of coins is required to confirm the formation of a bottom price.
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The analyst also noted that MicroStrategy founder Michael Saylor sold $216 million worth of Bitcoin, a move he harshly criticized.
“We know that Michael Saylor does not want to sell Bitcoin, but he was forced to take this step to fund the company’s financial structure (dividend payments on fixed income products). This is a capital management issue for MicroStrategy (MSTR) shareholders and does not directly create any permanent systemic risk or margin call for the Bitcoin market.”
According to Polymarket data, the probability that the “Clarity Act,” a virtual currency regulation bill expected to be passed by the U.S. Congress, will be enacted by the end of this year has dropped from more than 75% to less than 50% (about 40%). TDR notes that potential midterm elections in which Democrats pass the House could reset the process, which could be negative for markets in the short term if no progress is made before the August recession.
Given historical price declines of 68% to 75%, it wouldn’t be surprising to see prices drop to the $40,000 range, he said.
*This is not investment advice.
